Management control audits

14 May by Logistics

Management control audits

Management control audit systems in freight logistics industry

The cornerstone of every management control system is the concept of responsibility accounting. The idea is simple: each manager in a freight logistics company has responsibility for a part of the total activity. The logistics ERP accounting system should be designed so that it provides a dashboard view of the financial effects of the activities that a manager is responsible for.

Boundary & interactive control systems in logistics audit

This dashboard view can be stated in the form of a financial objective for operations or workshop managers. Specifying that objectively helps in delegating authority; a supply chain manager knows that the “right” decision is the course of action that moves him down the path toward his financial objective. But this system does not go far enough. No single dashboard view, no matter how carefully developed, can accurately reflect how well a manager is doing his job. Part of the failure is simply due to the fact that logistics firms, and their managers, have multiple objectives to achieve.

Workplace safety control audits

For example, there is the matter of workplace safety and compliance in warehouses at the time of Covid 19. Good performance toward that goal, even in measurable terms, cannot be added to profitability.

Another major inadequacy of a single financial dashboard view is that it reflects performance during a particular time period, ignoring the effects that current actions may have on future performance.

Every manager in the logistics industry must make trade-offs between short-term and long-term needs; examples range all the way from the fleet workshop foreman who defers spare change in order to increase this month’s output, but at the expense of a major fleet breakdown next month, to the operations manager who cuts his digital transformation budget in order to improve the year’s profits but loses or delays the opportunity to introduce a profitable new warehouse solution three years from now.

Logistics management control audit systems

Despite these flaws, oversimplified financial measurements in the logistics industry are almost used in Africa region. Implementing boundary systems, interactive feedback, and belief systems will go a long way in reducing frauds. Read more on management control and audit systems article from HBR

ByLogistics

The Author brings over 30 years of experience in building digital automation and transformation solutions for the supply chain logistics and warehousing industries.

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